Dodd, Conrad cleared in ethics probe on Countrywide loans

Panel says senators could have 'exercised more vigilance' in their dealings

By

RonaldD. Orol

WASHINGTON (MarketWatch) -- Two key Democrat senators were cleared by the Senate Ethics Committee on Friday from year-long investigations about whether mortgages they obtained from Countrywide Financial Corp. violated the senate's rules on gifts.

The bipartisan committee, which supported the decision unanimously, did scold the senior lawmakers, Senate Banking Committee Chairman Christopher Dodd, D-Conn., and Senate Budget Committee Chairman Kent Conrad, D-N.D., for not being more careful in their dealings.

"While the committee finds no substantial credible evidence as required by committee rules that your Countrywide mortgage violated Senate ethics rules, the committee does believe that you should have exercised more vigilance in your dealings with Countrywide in order to avoid the appearance that you were receiving preferential treatment based on your status as a senator," the committee told both Dodd and Conrad.

At issue was whether the senators knew they were receiving a high level of preferential treatment when they participated in a Countrywide Financial V.I.P. program a few years ago run by the troubled mortgage lender, which is now owned by Bank of America
BAC, -1.38%

Lawmakers have raised concerns about Dodd's participation in such a special program, in part, because he has a key role as chairman of the senate banking committee in overseeing regulations of mortgages, many of which were key contributors to the financial crisis. Dodd is also responsible for setting the Senate agenda for a major overhaul of bank regulation, a key component of which will be reform of the mortgage sector.

"Once you became aware that your loans were in fact being handled through a program with the name 'V.I.P.' that should have raised red flags for you," the panel said in a letter to Dodd.

Countrywide ran an exclusive program for "Friends of Angelo," or F.O.A., named after the company's former chief executive, Angelo Mozilo, which provided "sweetheart" financial deals for special borrowers.

According to a letter to Dodd, the Connecticut senator told the ethics committee that he became aware that he had been placed in a V.I.P. program but said he was told that it offered heightened attention to service quality.

Conrad said that in 2004 he had been placed in a V.I.P. program, according to a letter from the committee to the North Dakota senator. Conrad said in 2002 he briefly spoke to former Fannie Mae CEO James Johnson -- a "long-time, mutual friend" -- about obtaining a mortgage for his beach property, according to the letter. At the time, Conrad said he spoke to Countrywide's Mozilo, who was with Johnson at the time, the letter said.

The ethics panel also pointed out that based on its examination of more than 18,000 pages of documents from Countrywide, they found that participation in V.I.P. or F.O.A. programs did not necessarily mean that borrowers received the best "financial deal available from Countrywide or other lenders."

Dodd said in a statement that he was pleased with the result and that he had learned from the experience.

"I'm gratified that the Democrats and Republicans on the ethics committee have dismissed this complaint and found that the underlying accusations simply were not credible," Dodd said.

The ethics committee, is made up of three Democrats and three GOP lawmakers, including Sen. Barbara Boxer, D-Calif., who is the panel's chairman. Before coming to its conclusion, committee members spoke to the two senators and took depositions from "numerous" Countrywide employees. However, there was no public hearing as part of the investigation.

Non-profit that filed the complaints is not impressed

Melanie Sloan, director of the non-profit group, Citizens for Responsibility and Ethics in Washington, or CREW, said in a statement she was disappointed with the result. CREW had filed complaints against the two senators on June 13.

"Apparently, clearing the senators was insufficient penance for the committee for having the audacity to investigate in the first place," Sloan said. "Like a battered woman who explains she brought the beating on herself, the committee faulted itself for failing to 'provide more guidance to the Senate community about issues surrounding mortgage negotiations.'"

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